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Training and Union Wages

  • Dustmann, Christian


    (University College London)

  • Schönberg, Uta


    (University College London)

This paper tests the hypothesis that unions, through imposing wage floors that lead to wage compression, increase on-the-job training. Our analysis focuses on Germany which provides an interesting context to test this hypothesis, due to its large scale apprenticeship programme and its collective bargaining system that is based on voluntary union recognition. To guide the empirical analysis, we first develop a model of firm-financed training. A novel feature of our model is that a unionised and non-unionised sector coexist, and only unionized firms are bound by union wages. The model creates a rich set of empirical implications regarding apprenticeship training, layoffs, wage cuts, and wage compression in unionized and non-unionised firms. Our empirical analysis is based on firm panel data matched with administrative employee data, and provides strong support for our model. Our main results are that unionisation increases training, and that wage floors and wage compression play a more important role in unionised than in non-unionised firms.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 1435.

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Length: 48 pages
Date of creation: Dec 2004
Date of revision:
Handle: RePEc:iza:izadps:dp1435
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  1. Acemoglu, Daron & Pischke, Jörn-Steffen, 1999. "Minimum Wages and On-the-Job Training," CEPR Discussion Papers 2177, C.E.P.R. Discussion Papers.
  2. Daron Acemoglu & Jorn-Steffen Pischke, 1999. "The Structure of Wages and Investment in General Training," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 539-572, June.
  3. Joseph G. Altonji & James R. Spletzer, 1991. "Worker Characteristics, Job Characteristics, and the Receipt of On-the-Job Training," ILR Review, Cornell University, ILR School, vol. 45(1), pages 58-79, October.
  4. Francis Green & Stephen Machin & David Wilkinson, 1999. "Trade Unions and Training Practices in British Workplaces," ILR Review, Cornell University, ILR School, vol. 52(2), pages 179-195, January.
  5. Daron Acemoglu & Joern-Steffen Pischke, 1998. "Beyond Becker: Training in Imperfect Labor Markets," Working papers 98-12, Massachusetts Institute of Technology (MIT), Department of Economics.
  6. Arulampalam, Wiji & Alison L Booth & Mark L Bryan, 2003. "Work-related Training and the New National Minimum Wage in Britain," Royal Economic Society Annual Conference 2003 9, Royal Economic Society.
  7. Alison L. Booth & Marco Francesconi & Gylfi Zoega, 2003. "Unions, work-related training, and wages: Evidence for British men," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 57(1), pages 68-91, October.
  8. Adam J. Grossberg & Paul Sicilian, 1999. "Minimum Wages, On-the-Job Training, and Wage Growth," Southern Economic Journal, Southern Economic Association, vol. 65(3), pages 539-556, January.
  9. Gibbons, Robert & Katz, Lawrence F, 1991. "Layoffs and Lemons," Journal of Labor Economics, University of Chicago Press, vol. 9(4), pages 351-80, October.
  10. repec:oup:qjecon:v:116:y:2001:i:4:p:1409-1448 is not listed on IDEAS
  11. Malcomson, James M, 1983. "Trade Unions and Economic Efficiency," Economic Journal, Royal Economic Society, vol. 93(369a), pages 51-65, Supplemen.
  12. Neumark, David & Wascher, William, 2001. "Minimum Wages and Training Revisited," Journal of Labor Economics, University of Chicago Press, vol. 19(3), pages 563-95, July.
  13. Schnabel, Claus & Wagner, Joachim, 2003. "Trade Union Membership in Eastern and Western Germany: Convergence or Divergence?," IZA Discussion Papers 707, Institute for the Study of Labor (IZA).
  14. Booth, Alison L & Chatterji, Monojit, 1998. "Unions and Efficient Training," Economic Journal, Royal Economic Society, vol. 108(447), pages 328-43, March.
  15. Arulampalam, Wiji & Booth, Alison L. & Bryan, Mark L., 2003. "Work-related training and the new National Minimum Wage in Britain -ISER Working Paper-," ISER Working Paper Series 2003-05, Institute for Social and Economic Research.
  16. John DiNardo & David S. Lee, 2002. "The Impact of Unionization on Establishment Closure: A Regression Discontinuity Analysis of Representation Elections," NBER Working Papers 8993, National Bureau of Economic Research, Inc.
  17. David Soskice, 1994. "Reconciling Markets and Institutions: The German Apprenticeship System," NBER Chapters, in: Training and the Private Sector: International Comparisons, pages 25-60 National Bureau of Economic Research, Inc.
  18. repec:oup:qjecon:v:113:y:1998:i:1:p:78-118 is not listed on IDEAS
  19. Booth, Alison L. & Francesconi, Marco & Zoega, Gylfi, 2002. "Oligopsony, Institutions and the Efficiency of General Training," IZA Discussion Papers 618, Institute for the Study of Labor (IZA).
  20. Stevens, Margaret, 1994. "A Theoretical Model of On-the-Job Training with Imperfect Competition," Oxford Economic Papers, Oxford University Press, vol. 46(4), pages 537-62, October.
  21. Hashimoto, Masanori, 1982. "Minimum Wage Effects on Training on the Job," American Economic Review, American Economic Association, vol. 72(5), pages 1070-87, December.
  22. Wiji Arulampalam & Alison L. Booth & Mark L. Bryan, 2004. "Training and the new minimum wage," Economic Journal, Royal Economic Society, vol. 114(494), pages C87-C94, 03.
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